John R. Dorocak (California State University, Department of Accounting & Finance) has published State Tax Informants: Rewards and Liabilities Implementation in California and Guidance From the New and Old Federal Program –Should They be Paid?, 38 Cumb. L. Rev. 279 (2008).  Here is part of the Conclusion:

[A]lthough the Service solicits information from tax informants both civilly and criminally, there appears to be at least some duality in welcoming those informants, judging by the restrictions placed upon their rewards. The state regimes, with California as a leading example, appear to mirror the IRS’s duality and ambiguity. In California, the rewards for informants both under the Franchise Tax Board administration and the State Board of Equalization administration are not presently funded. All of this would seem to indicate the informant is much more likely to furnish information to a taxing authority, particularly a state taxing authority, for motives other than financial reward and to view the financial reward as a bonus if indeed it is forthcoming. In fact, the California State Board of Equalization’s Sales and Use Audit Manual recommends that “auditors may attempt to obtain such information by appealing to the person’s sense of duty as a good citizen.” It may be, however, motives as pure as good citizenship which may motivate most informants and, thereby, the ambiguity in fostering these informant reward programs.